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F87/100FDD 2025

Mainstream Boutique — Litigation & Risk

Retail · FDD Items 3, 4 & 5

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Moderate — Review

1 case disclosed in FDD Items 3 and 4.

Source: FDD Items 3–5

FDD Items 3 & 4

Litigation Metrics

Cases disclosed
1
Total from FDD Items 3 and 4
Bankruptcy (Item 4)
—
Franchisor or officer bankruptcy
Overall risk score
87 / 100
FranchiseVerdict composite
Rating
AVOID
STRONG / MODERATE / CAUTION / AVOID

7(a) FOIA data · FY2020–present

SBA Loan Performance

Aggregated from public SBA 7(a) loan disclosures. Default rate is the share of loans that were charged off or settled for less than the full balance.

Total 7(a) loans
21
Government-backed loans issued
Default rate
42.9%
vs <3% typical · system-wide
5-yr default rate
—
Defaults
6 loans
Loans charged off or defaulted
Total loan volume
$3.1M
Avg loan size
$147K
Participating lenders
17

FDD Items 5, 6 & 17 — what you give up

Contract Risk Indicators

Mandatory arbitration
Required
Disputes resolved outside court — limits your legal options
Jury trial waiver
Waived
You give up the right to a jury trial
Non-compete
2 yrs
Post-termination restriction on similar businesses
Franchisor can compete
Yes
Franchisor can open competing locations in or near your territory
Right of first refusal
Yes
Franchisor can match any purchase offer when you try to sell
Governing law
Retail Location State
State whose law governs disputes — relevant if you're not based there

What drove the 87/100 rating

Risk Score Breakdown

  1. 01MEDUnit count declined 7.2% year-over-year (67 units), indicating system contraction and potential market saturation or operational challenges
  2. 02MEDFinancial performance metrics (average revenue and net income) not disclosed in FDD Item 19, preventing ROI validation and profitability assessment
  3. 03HIGHRecent litigation settlement (November 2020) involving breach of contract and Minnesota Franchise Act violations suggests franchisor-franchisee relationship tension and potential compliance issues
  4. 04MEDHigh royalty rate of 7.5% combined with undisclosed profitability data creates uncertainty about net income viability
  5. 05MINORFranchise fee of $40,000 plus total investment of $198,200–$361,350 requires strong unit economics to justify, which cannot be verified

Severity inferred from FDD text — not a regulatory or legal classification

Litigation data from FDD Items 3, 4, and 5. SBA data from public 7(a) FOIA records (FY2020–present). Not legal advice — consult a franchise attorney before signing any franchise agreement.